Gold's own country

Last updated on: November 26, 2007 10:54 IST

In the United States you might find the largest and biggest shopping malls in the world but when it comes to jewellery, Kerala would easily beat them. Sitting in the first floor of his 12,500-sq-ft jewellery complex on M G Road in Ernakulam, Antony Alapatt of Alapatt Heritage says, "America's largest jewellery showroom would be just half the size of ours."

Buying ornaments and investing in gold is part of the culture of Keralites for generations. In the olden times the royal families in the state used to be fond of gold ornaments. "My grandfather used to get invitation from the Tripunithara Royal Palace in Kochi. He used to go to the palace along with his goldsmith and find out their design requirements. Our goldsmith would then stay there and make gold ornaments for them," says Ramesh S Pai of A Geeripai Jewellery.

A Geeripai could easily stake its claim to be the oldest jewellery shop in the state. It was started 106 years ago in Broadway, Ernakulam, much before the famed Bhima Jewellery set up shop in Alapuzha in 1925. "We have cash bill books that are more than 76 years old," Ramesh said.

Now the Alukkas, Alapatt, Chemmanur, Josco, Malabar Gold and the grand old Bhima are all on an expansion spree in India and abroad. Paul Alukka of Alukkas Jewellery said after setting shops in Salem, Coimbatore, Erode, Trichy, Tirunelveli, Delhi, Madurai and Hyderabad, he is now eyeing Maharashtra and Gujarat.

"The main reason for not expanding in Kerala is the four per cent value-added tax on gold. Many other states have only one per cent tax. Moreover, jewellery market has become overcrowded in the state," he said. Arrens Gold Souk International Ltd, a real estate developer, is setting up a shopping mall in Kochi in 2.5 acres of land in prime location where one of the focus areas will be gold ornament showrooms.

The mall will have reputed jewellers from both India and abroad. Leading Indian jewellers such as Joy Alukkas and Alapatt have already signed up for Gold Souk.

"The IT boom in Kochi and other centres would create higher demand for gold. Our upcoming facilities in Thiruvananthapuram and other cities would be much bigger projects to be housed in 10-20 acres of land with parking facilities for 1500-3000 cars," Mohan Varma, Resident Director of AGS, told Commodity Market. What accounts for the rapid increase in jewellery shop space in Kochi and all over Kerala? God's Own Country is estimated to account for one-third of the 800-odd tonne annual consumption of gold in the country.

"The consumption in last quarter was more than 300 tonnes in India. Definitely gold consumption is increasing but showroom space everywhere seems to be increasing at a much faster pace," Antony Alapatt said. How far could this competition and growth be sustainable? Paul Alukka feels that small jewellers would gradually be driven out of business just as factory made jewellery has eaten into the livelihood of traditional goldsmiths.

People now look for quality and purity of ornaments. They look for 916 purity and BIS hall marking. Here the large shops have an edge and variety. Large jewellery houses are now invading smaller towns and villages. For a 2,000-sq-ft showroom more than 25 salesmen would be required apart from interiors.

Pre-launch advertisement costs for major showrooms are anywhere in the range of Rs 50 lakh to Rs 1 crore, according to market sources. However, Antony Alapatt feels that road congestion, lack of parking space, longer hours required to travel to city would all be unfavourable for the business growth of large shops. "Why travel one hour to buy one sovereign of gold. They can easily get it from a nearby smaller shop."

BRAND BUILDINGCompetition has also led to several promotional and gift schemes for Keralites. Joy Alukkas Group, which set up a wedding centre at Kochi at a cost of Rs 50 crore, gave away 32 Maruti cars in a lucky draw in 2006. Joy Alukkas which has spread its wings to Delhi, Hyderabad, Madurai, Tiruchirapally, Salem, Bangalore and Dubai, believes "it is easy to start a new

showroom but very difficult to run it efficiently".Joy Alukkas' strength lies in his personal attention to get the best location, attractive promotional offers and a creative eye on ads.

Not surprisingly, the group has set its eyes beyond the moon by aiming for a turnover of Rs 5,000 crore by 2010. M P Ahamed of Malabar Gold, which started its first showroom in 1993, has now over 11 showrooms within Kerala and outside. He personally studies each location in terms of business potential, social and political conditions before deciding to set up shop. Malabar Gold also went for an expensive brand building exercise involving cine stars Mohanlal and Hema Malini and tennis sensation Sania Mirza. The Malabar Gold group has also branched off into manufacture of gold jewellery, its own branded gold, precious watches, readymades, retail and real estate.

CHANGING STYLESWith the disposable income of the average Keralite going up, thanks to newer opportunities in IT, tourism, banking and allied services, the preferences for jewellery is also undergoing a major change. "Now we sell 80 per cent gold and 20 per cent diamond jewellery. Platinum is also in demand. In diamonds, the trader margins are higher, Paul Alukka said. Some of the major jewellers have also sent their siblings or partners abroad for advanced training in gemology.The teenagers, young women and professionals prefer light weight ornaments instead of the large and bulky traditional ornaments.

In tune with the changing tastes of the younger generation, jewellers are also innovating with newer lightweight designs. White gold is also a favourite of the upper income consumers. The traditional jewellery is still in demand for wedding purposes.In Kochi, customers seem to prefer chic western designs in 'yellow' (gold and copper), 'white' (gold and nickel) and 'pink' (gold with Rhodium polish) gold. In Thiruvananthapuram, however, conventional jewellery with a contemporary twist reigns supreme.

SLOW TO CHANGEThe market for unconventional jewellery is yet to be tapped. Paul Alukka said North Indian designs are now available in most of the shops. One can see elements of the north Indian style, such as the intricate kundan work of Rajasthan or the filigree work characteristic of Kolkata, making their way into new versions of traditional ornaments such as Maangamala (with mango motifs) and Kaasumala (with coin motifs). Business everywhere is seasonal and increases during the wedding season. It sometimes reaches a peak during the Akshaya Trithiya day which is supposed to be the most auspicious day for buying ornaments.

Families invest in gold mainly for wedding purposes. But it also comes handy when in need of a loan. Banks are now eager to provide gold loans which are less risky than other types of retail loans. The booming yellow metal market also gave a golden opportunity for several banks to cash in on. Even private banks such as ICICI and Federal Bank could sell of their entire consignments of gold coins within a short period of time.

Kochi is slowly emerging as the gold capital of Kerala. Bhima, Alapatt, Josco, A Geeripai, Keertilal, Tanishq and Kalyan have already covered the city with the yellow metal. The construction work of Gold Souk is in full swing. Major jewellers from outside Kerala are also expected to invade this growing market.

Kozhikode and Kannur are also attractive destinations for gold traders, according to Ramesh Pai. Geeripai has new plans for showrooms at the IT gateway of Kochi at Kakkanad, apart from Kozhikode and Kannur. Earlier, the success of a jewellery shop was dependent on service, adequate stock and advertisements but now quality is also very important, so is workmanship and design, said Paul Alukka.

Another sector which is booming in Kerala now is imitation jewellery business. Fear of theft, gold snatching and burglary have led to a parallel market for imitation jewellery and ornaments. Branded shops in this segment have invaded all nooks and corners of Kerala.